Nigeria court decision will alter fiscal federalism

Significance

The case is set to appear before the Supreme Court. If the earlier high court decision is upheld, it would have substantial political and economic implications for the country, especially for how businesses deal with taxation.

Impacts

• Compliance costs for foreign businesses and businesses working across state borders will increase if states collect VAT.
• States will increasingly challenge the federal government in fiscal matters.
• The impact on revenue allocation on states will benefit southern over northern Nigeria, deepening regional tensions.